Wednesday, February 26, 2014

Two weeks ago the CBO released their report analyzing the effects of raising the federal minimum wage to either $9.00 per hour or $10.10 per hour (you can read the report here). In short the results were mixed. Looking specifically at the increase to $10.10 per hour they found job losses to be approximately 500,000 (or about 0.3% of our total level of employment) with a 2/3 probability job loss will lie between slight decrease to a decrease of one million. On the flip side they found incomes for families below the poverty threshold would increase by $5 billion. Incomes would increase by $12 billion for family with income from one to three times the poverty threshold and another $2 billion for families with income four to six times the poverty threshold. Incomes will decline by $17 billion for families with income greater than six times the poverty threshold (you can see the poverty threshold here). On the net real income in the economy would increase by $2 billion (or 0.022% of total wage income). In regards to the increase to $9 per hour the net effects would be 100,000 jobs lost and a net increase of $1 billion in real income.

So the conclusion is not much of a conclusion. Increasing the minimum wage involves a tradeoff (a small one at that) do we sacrifice 500,000 jobs for a net increase of $2 billion in real income? Is it better to have more jobs or fewer, better paying jobs? Either way this provides further evidence that an increase in the minimum wage is not the answer to combat the rising levels of income inequality. The benefits of a higher minimum wages are far lower than those touted by liberals. But the costs are also significantly lower than those proclaimed by conservatives. Of course, neither party wants to admit that they are exaggerating the truth.

I did a google search on the phrase: CBO report on higher minimum wages, and was interested to see the message espoused by news organization. Here are screen shots of the headlines in order of conservative, liberal, and neutral:

Most mainstream new organizations reported relatively neutral headlines. I did not read each and every article and cannot comment on the content within each article. For the most part Fox News (perhaps most surprising), NY Times, CNN, WSJ, Washington Post, PBS, and Al Jazeera used neutral headlines. Whereas CNBC, FoxBusiness, Christian Science Monitor, News Max, NY Daily, Washington Times, The Hill, and Barrons lead with more conservative leaning headlines. Those with more liberal headlines were Huffington Post, Fiscal Times, NPR, and Politico.